Aussie Animals cards help double Woolworths growth

Sue Mitchell

Rising grocery and produce prices and a successful trading card promotion featuring ‘Aussie Animals” helped Woolworths lift group sales 5.9 per cent to $16.16 billion in the latest quarter, almost double the rate of growth in the first quarter of fiscal 2014.

Sales growth in Woolworths’s earnings engine-room, the Australian food and liquor business, rose 5.1 per cent in the 13 weeks ended January 5. Same-store sales climbed 3.4 per cent, buoyed by the roll out of new stores. The same-store sales growth exceeded analysts’ forecasts of about 2.75 per cent and compared with 2.5 per cent first-quarter growth.

In New Zealand supermarkets, total sales rose 16.6 per cent in Australia dollar terms and 3.4 per cent in NZ dollars, with same-store sales up 2.1 per cent.

Sales in the home improvement business climbed 22 per cent to $405 million, falling short of analysts’ forecasts of about 30 per cent. Masters sales rose 46.5 per cent to $211 million, buoyed by seven new stores, but sales at the Danks wholesaling business, which has been losing members to Mitre 10, rose just 3.2 per cent.

Online sales rose more than 40 per cent in the second quarter as customers took advantage of increased flexibility in ways to shop. Onlines sale now exceed $1 billion on an annual basis, ahead of target.

The solid second-quarter sales results lifted Woolworths’s half-year group sales from continuing operations 6 per cent to $31.8 billion, which was in line with forecasts.

Chief executive Grant O’Brien said the strong first-half sales result reflected progress against the retailer’s four-point strategic plan, which is aimed at restoring profit growth to about 10 per cent over time.

“The first priority, and the central theme of our focus, has been to ‘extend our leadership in Food and Liquor’. The improvement in the growth rates for our Food and Liquor business demonstrates the transformation that is underway,” Mr O’Brien said in a statement.

“Successful Christmas trading in Australian food and liquor helped to deliver sales growth of 4.8 per cent for the half year as well as increases in market share, customer numbers, basket size and items sold,” he said. Woolworths is now serving 21 million customers a week, 3.9 per cent more than the previous year.

Mr O’Brien said Woolworths supermarkets delivered savings of more than $400 million to customers, predominantly through the ‘More Savings Every Day’ promotion. However, standard shelf prices (excluding promotions) rose 2.1 per cent in the second quarter after being flat in the first quarter, reflecting higher prices for tobacco and fresh produce.

Mr O’Brien is confident of delivering 4 to 7 per cent net profit growth this year.

“We’re pleased with where the food and liquor business is trading - we are making sure we continue that momentum for the full year,” Mr O’Brien said on Thursday after releasing better-than-expected second-quarter sales results.

“If the sales momentum we’ve seen was not going to deliver the (profit) guidance we’ve given, we’d be making an announcement,” he said. “We’re not, which means we’re generally happy with the sales momentum in the business and that will meet our sales targets moving forward.”

According to consensus forecasts, analysts are forecasting 5.9 per cent net profit growth to $2.5 billion for the year.